Powell is not leaving, and the Federal Reserve is in an uproar.

Author: Bootly, BitpushNews

During Powell’s final policy meeting as Federal Reserve Chair, the largest official dissent since 1992 occurred.

On Wednesday, U.S. time, the Federal Open Market Committee (FOMC) announced it would keep the benchmark interest rate unchanged at 3.5% to 3.75%, continuing the stance of holding steady since the beginning of the year. What quickly tightened global traders’ positions was the voting result at the bottom of the statement: 8 votes in favor, 4 votes against. The last time four dissenting votes appeared was in October 1992.

That day, the two-year U.S. Treasury yield briefly jumped 11 basis points to 3.95%, marking the largest single-day increase on Fed decision days since January 2022, with traders raising the probability of rate hikes before April 2027 to 50%.

Before the market could fully digest this voting result, Powell dropped another bombshell at the press conference. He announced that after his term ends on May 15, he will remain on the Federal Reserve Board as a director “for some time.”

U.S. President Trump immediately posted a sarcastic comment: “Jerome ‘Too Late’ Powell is staying at the Fed because he simply can’t find a job outside—nobody wants him.”

Four dissenting votes, different logic

The last time such intense internal opposition appeared at the Fed was in October 1992, during the final days of George H. W. Bush’s presidency, when Greenspan was trying to walk a tightrope between recession and election pressures.

34 years later, many seeing the “four votes against” first think that the Fed is already unanimously calling for rate cuts. Actually, that’s not the case. The four dissenting votes today are not aligned; in fact, they even clash with each other.

Milan: The Fed’s rate cut instigator planted by Trump

Stephen Miran cast the only vote for a rate cut.

As the first Fed appointee in Trump’s second term, Miran’s background is completely different from that of traditional academic central bankers. Coming from a hedge fund, involved in top-level tariff policy design, his thinking bears a clear trading room imprint. In Miran’s view, a benchmark rate above 5% is becoming a stumbling block for the U.S. real economy’s recovery and manufacturing revival.

His reasoning is that, with rising expectations of trade tariffs, inflation is under pressure, but if financing costs are not lowered simultaneously, domestic U.S. companies’ expansion will be stifled. He calls for a 25 basis point rate cut, essentially shifting monetary policy from “fighting inflation” to “supporting growth.”

Wall Street’s “Iron Lady” Hammack: Rejecting empty promises

Contrary to Miran, Cleveland Fed President Beth Hammack represents another extreme.

With a 30-year career leading Goldman Sachs’ financing division, Hammack has a natural aversion to “signal pollution.” She supports keeping rates unchanged but firmly opposes including ambiguous language like “consider further adjustments” in the statement.

Hammack’s view is that since current economic data do not justify a rate cut, the Fed should not sneak in “rate cut expectations” in its statement. She believes Powell’s “dovish tilt,” aimed at balancing interests, is undermining the Fed’s credibility.

Theoretical camp: Kashkari and Logan

Kashkari and Logan’s dissent is more ideological.

Logan, who has long managed operations at the New York Fed, is like a seasoned technician watching the water meter daily. She knows that even a slight soft signal in the statement can cause financial markets to immediately lower bond yields, effectively acting as a “de facto rate cut,” which would counteract the Fed’s ongoing balance sheet reduction (QT).

Kashkari, on the other hand, has evolved from a dove to a hawk. He sees not an economic recession but energy price fluctuations triggered by geopolitical conflicts. He believes that talking about easing before inflation is subdued is like pulling back the fire trucks before the fire is out.

The four dissenting votes essentially expose the issues facing the Fed early on. Miran’s vote reflects concern over economic risks and pushes for faster rate cuts. Hammack, Kashkari, and Logan’s votes are warnings about persistent inflation and correcting market over-optimism.

Powell’s continuation: a game of independence

Powell’s stay is a defense of institutional boundaries.

Since the Fed’s founding in 1913, it has been extremely rare for a chair to remain on the board after stepping down. The most recent case was in 1948 with Marriner Eccles, during the darkest period after WWII when the U.S. government tried to forcibly lower interest rates and undermine the central bank’s independence. Eccles stayed on to keep a close watch on every move of the White House within the Board.

Powell faces a similar situation.

1. The Department of Justice’s Sword

Over the past six months, the DOJ’s investigation into the overspending on the Fed building renovation has been like a sword hanging over Powell’s head. Although last Friday’s announcement canceled the investigation and promised it would not restart soon, Powell clearly does not trust the so-called “oral commitments.”

He said at the press conference, “I will not leave until the investigation is thoroughly concluded.” The implication is that if he resigns now, he loses the protection of being an “acting official.” Staying on as a director is his personal battleground to secure legal innocence and prevent being “purged” after retirement.

2. The Last Barrier of Independence

Deeper reasons lie in Powell’s desire to hold onto his seat. The Fed has only seven board seats. If Powell resigns as chair and also steps down from the board, the president can immediately nominate two new members. But if he remains on the board, the White House has one less slot to fill with its own people. He doesn’t need to openly challenge Waller; simply emphasizing independence, procedures, and data dependency will serve as a stabilizing force.

Troubled Waller

The next FOMC meeting in mid-June will be Waller’s first appearance as chair. The challenge is not whether to cut rates but whether he can control the committee.

He will face:

• A former chair, Powell, sitting in the audience, with great prestige and the potential to vote against him at any time.

• Miran, ready to oppose and show loyalty to the White House.

• A group of regional Fed presidents highly sensitive to inflation, even willing to openly criticize the chair.

Waller’s style has always been characterized by a hardcore approach, emphasizing balance sheet reduction and shrinking assets. But in this internal conflict, every decision he makes will be scrutinized under a microscope.

The upcoming Fed will enter a period of “extreme lag in decision-making due to lack of consensus,” which is clearly not good for the markets.

Chris Grisanti, Chief Market Strategist at MAI Capital Management, commented:

“The most significant news is the dissent among FOMC members, not about the rate decision itself, but about the ‘dovish tilt’ retained in the statement. There are two purposes: on the surface, it appears more hawkish, signaling ‘we may no longer lean toward easing,’ which is a new message. But more importantly, I think this is a ‘warning shot’ to the incoming Fed Chair Kevin Waller. Waller has always supported easing policies, and these dissenters are clearly telling him: ‘Don’t assume we will support your easing intentions.’ I foresee a lot of drama ahead.”